Reader- a bit of a confession. Part of the reason I created this blog is to have a place to put my academic papers. Please excuse my self indulgence. Anyways, I decided to do this in a serial format. I will put out a section or two of the paper once a week or so so that it will be like a series of cliff hangers until the exciting conclusion. If I can’t be self indulgent in my own blog, where else can I?

NORTH KOREAN ILLICIT ACTIVITES: THE BUREACRACY OF CRIMINAL PATRONAGE

North Korea has been called a criminal state, a mafia state, and United States officials have even called it a Soprano state after the popular gangster show. The ruling Kim regime has engaged in a wide variety of criminal activities ranging from the drug trade to counterfeiting, money laundering and even computer hacking. North Korea has been engaged in illicit activity since at least the 1970’s, and such activity has been a part of the government structure since 1974. While many states have been involved in illicit activities, the North Korean state’s activities are unique not only for their ongoing and pervasive nature, but also for the way that they have been formalized as a part of the governmental structure of the Korean Workers Party.

In order to understand these activities, it is not enough to acknowledge that they occur, but it is also necessary to inspect why an already isolated state would chose a course of action that could only further isolate it. The choice to become involved in these sorts of activities was not randomly or recklessly chosen, but was dictated by the geopolitical and ideological circumstances faced by North Korea. In order to discuss possible strategies other states can use to constrain these criminal activities, it is vital to first assess why they depend on criminal activities, what the activities are, and how they can present a weakness to be exploited.

Office #39 and Bureaucratic Criminality

To understand the criminal activities of the North Korean state the best place to start is with the history of Office #39 of the Korean Workers party. Office #39 was created in 1974 to find ways to acquire foreign currency, including through illegal methods which are currently estimated to earn an estimated $500 million to $1 billion a year.1 This new function of government was placed under the control of Kim Jong Il, and remains a part of the bureaucratic structure of the Korean Workers Party and of the North Korean state.2 North Korea is one of the only regimes where the institutionalization of a criminal economy is a rational choice. North Korea’s own currency is virtually worthless outside of the country, and even in the country foreign currency is needed to buy foreign merchandise and things like extra food.3 North Korea has few ways of legitimately acquiring foreign currency, so illegitimate means have become less of a choice and more of a necessity.

One integral factor of the Kim regime is its ideology, Juche. Juche’s central tenant is the necessity of self reliance. In the early 1970’s North Korea took out large loans from capitalist countries like France and the United Kingdom to purchase equipment and factories in order to become industrially self sufficient. It was intended to be a onetime purchase so that North Korea could learn how to build its own factories and be even less reliant on global trade. From 1970-1975, according to measures taken by the South Korean government, the North Korean government borrowed $1,242 million. After 1975 North Korea was unable to borrow any more money because its access to credit was cut off, and it has remained in default since then.4

Another way this isolation has made it difficult to acquire foreign currency is the lack of access the North Korean regime has to world markets. Before the collapse of world communism, North Korea was able to trade with other communist nations, especially its sponsor the Soviet Union. In 1990 the Soviet Union informed Pyongyang that it would now only trade conduct trade on a hard currency basis, at world prices, and also requested repayments of $4 billion dollars worth of debt. Even if North Korea was able to trade widely with other countries it has few goods that other countries are interested in trading for. One of the only products that North Korea has successfully imported is weapons. During the Iran-Iraq war Pyongyang was able to earn over $4 billion dollars from 1981-1989 by exporting a wide variety of armaments to Iran. During this time period North Korea was also able to export weapons to Libya, Syria, Pakistan and Egypt. The end of the Iran-Iraq war happened shortly before the collapse of the Soviet Union, and contributed to the desperate situation of the North Korean economy.5